Relief at the Gas Pump in Sight for Californians

Prices expected to drop by the end of the week

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    NEWSLETTERS

    After a weekend of record-high gas prices in California with a 50-cent jump in some areas, drivers may finally get some relief at the pumps this week. Gov. Jerry Brown asked to switch to winter blend, which is cheaper but emits more pollution. Stephanie Chuang reports. (Published Tuesday, Oct 9, 2012)

    After a weekend of record-high gas prices in California with a 50-cent jump in some areas, drivers may finally get some relief at the pumps this week.

    AAA spokeswoman Cynthia Harris says San Francisco has the highest gas prices in the country, but is showing signs of slowing with a penny increase overnight to $4.74 for a gallon of regular.

    Bay Area Gas Prices Higher Than National Average

    [BAY] Bay Area Gas Prices Higher Than National Average
    In California, the average price of a gallon of regular gasoline clocked in at $4.65, according to the Automobile Club's daily fuel price report. The national average was $3.81. Bob Redell reports. (Published Monday, Oct 8, 2012)

    “Our highest-ever recorded price was in 2008 for $4.62. So we’re way over our highest-recorded ever price,” said Harris. “But we should start seeing it come down a penny, two- or three-cents. By the end of the week, maybe 5,6,7, 8 cents.”

    Governor Jerry Brown has already asked state regulators to step in. The U.S. Environmental Protection Agency approved his Sunday request to switch to the winter blend ahead of its usual October 31st deadline. It’s a cheaper blend of gas, but emits more pollution compared to the more expensive summer blend.

    Several California refineries are not producing at full capacity. The August fire at Richmond’s Chevron refinery, an Exxon Mobil shutdown at a Torrance refinery, a routine maintenance shut down at a Philips 66 refinery in Southern California, and a malfunction at a Chevron pipeline that transports crude oil to Northern California have led to a shortage in clean-burning California-grade gas.

    That grade of gas-blend was adopted by California in 1996. No other state has the same requirement.

    “California is a gas island and we have 14 refineries that produce this special blend required by the state,” Harris noted. “When there’s a refinery that shuts down and produces special blend for California, it’s hard to replace.”

    Severin Borenstein, co-director of the Energy Institute at UC Berkeley’s Haas School of Business, says there is concern that refinery companies may raise prices because there are so few of them that produce the special blend. Chevron, he said, holds more than 20-percent of the market.

    “Those companies are in position where if they change their output it does move the price. The real question then is would they do that?”

    U.S. Senator Dianne Feinstein thinks that answer is “yes.” She’s asking the Federal Trade Commission to look into whether there’s been an “illegal short squeeze.” She cited a Reuters investigation pointing to industry sources who believe the spike is a result of refineries withholding supply to drive up prices.

    Borenstein said, “It’s very difficult to figure out when that’s happening, and even if it is, as long as they’re acting unilaterally, as long as they’re not colluding, there’s nothing illegal about it.”

    He adds that the record high prices are caused primarily by the world market & price of oil, so that the relationship between the U.S. and Middle East, as well as the stability of the Eurozone, have a lot more impact on consumers’ wallets than these temporary state shortages.

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    Sen. Feinstein spoke about the gas situation on Google Plus, Monday afternoon. You can watch the video below.

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